I’m $110,000 in Debt. Could This Offer I Got in the Mail Help Me?

This and other personal finance questions, answered.

Welcome to Ask the Bills, where every two weeks Helaine Olen answers readers’ questions about their most nagging personal-finance and financial etiquette dilemmas. Seeking advice on a money issue? Email helaine.olen@slate.com.

I have an astronomical amount of student debt—more than $100,000 in federal undergrad and grad PLUS loans combined. I consolidated them and am on a government income-based repayment plan, which makes it manageable on a monthly basis, but I worry a lot about the total sum. It’s compounded by credit card debt, which is about $10,000. Every month or so, I get snail-mail offers from places like Lending Club and SoFi to refinance with them at very low rates. I can’t tell if these are a good idea or not or if they’re a good option for credit card debt but not student loan debt. Or both? Or neither? Help me out.

It sounds like your debt is eating away at you. Of course it is. If you were copacetic about owing more than $100,000, there’d be something wrong with you.

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Let’s start small. You don’t need me to tell you that carrying credit card debt isn’t great for your long-term financial health. But no one thinks, “Credit card debt! Sign me up!” It’s almost always something that happens to us—an emergency here, a dinner with friends there. So, yes, you should seek to pay off this part of your debt as fast as possible.

You might never fully pay off your student loans under the federal repayment plan. That’s not ideal—but it’s still OK.

But is peer-to-peer lending the way to go? I have my doubts. First, those very low rates you mention are the lowest ones offered, but that doesn’t mean they’re the ones you will be offered. Second, those rates might be so great, in part, because the lender will expect you to pay off the debt in a short, circumscribed period. Not only could your monthly tab go up, but if something changes in your life, you might find yourself in even worse financial straits. All in all, you’re probably better off applying for a credit card offering a short-term 0-percent transfer period—which means no interest charged on the amount you transfer over for a predetermined period of time (though they often charge a percentage-based fee in return for the offer)—and then attempting to pay down as much of the debt as possible before the end of the no-interest period. Pay as much as you can—not just the minimum due—every month.

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How did debt get so bad in the United States? Join personal finance columnist Helaine Olen as she takes in-depth look at the reality of debt in America. What’s it like to empty out your 401(k) to help a family member? What works—and what doesn’t—for people struggling to get out of debt? Find out in this series. Join us today.

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Now the student loans. Given the amount you owe, it’s possible you’ll never fully pay them off under the federal repayment plan. That’s not ideal—but it’s still OK. The Department of Education program is set up so as to not ruin your life because you went to college. You aren’t taking advantage of anyone by using it. Moreover, as education debt expert Mark Kantrowitz told me, “Borrowers who refinance federal student loans into private student loans or noneducation loans lose the benefits associated with federal loans, such as death and disability discharges, deferments, forbearances, and loan forgiveness.” In other words, if you used a peer-to-peer lender in this instance, you would have to pay it all off on a schedule that doesn’t take your circumstances into account. Stick with what you have. Remember, the government forgives your remaining balance at the end of your repayment period.

Finally, start an emergency fund. There’s no point in paying down credit-card debt only to need to resort to plastic the next time you need money.

Helaine,

My husband and I just joined an amazingly interesting and great church in a once-edgy but now-wealthy neighborhood, which we used to live in but no longer do. Last night we attended a dinner welcoming new members, held at a member’s home. When I found out the name and address, I Googled it. I saw that this couple had purchased it for a few million dollars, even though the husband and wife work in professions that don’t typically pay well. Maybe it’s inherited money? Meanwhile we’re still struggling to make a living and pay down debt accumulated through bouts of unemployment and underemployment. Yes, we moved for financial reasons.

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This church puts a high value on inclusiveness. And the dinner group was made up of fascinating, varied, and friendly people. However, it became apparent as conversations continued that we were probably the poorest people in the room. People were mentioning vacations in expensive resort communities, both in the United States and Europe. I felt like the proverbial church mouse in that company. We’re much better off than lots of our age peers for sure but way less affluent than many of these people. I had to suppress my envy. But how do you handle the feelings that come up when you’re a 99 percenter in a group of the quite rich?

Once upon a time you lived in a middle-class neighborhood. All sorts of people lived in it. Then over time the neighborhood, like a lot of city neighborhoods, changed. It went upscale. It hypergentrified. It’s become a place for millionaires. You, like many other people, decided you couldn’t keep up. You left. But it’s clear you didn’t really want to leave. That’s because you’re still making your now-former neighborhood the focus of your life. You don’t live there, but you haven’t left it behind. It’s understandable—but it’s a mistake.

You moved because you can’t keep up with this crowd. Even thinking about what these people can afford—and what you cannot—makes you feel worse about your life. I’m sure the people at the church are lovely. I’m sure they are inclusive. It doesn’t matter. Make a life in your new surroundings. That doesn’t mean you can’t visit. But don’t make your old stomping grounds the center of your existence. Find a church in your new neighborhood.

Oh, and checking into their real estate history? I know it’s tempting. But no. It’s one thing to Google someone. It’s another to check out their financials before you’ve even met them. Yes, it’s public information, but it is still a creepy invasion of privacy.

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Helaine,

While leaving my apartment this morning, I found a $10 bill and three ones lying on the ground right outside the door. There’s a bus stop a few feet away from the door, so someone might have dropped the $13 while waiting for the bus. Or one of my neighbors might have dropped it while exiting the building. What should I have done?

Loose money—that is, money found without an accompanying wallet or anything else that could be used to properly identify the owner—is all but impossible to return. We acknowledge this when we pocket a penny or quarter we spot on the ground. But it gets weird when the amounts are larger. We feel like we’re getting away with something when we see a dropped dollar bill—to say nothing of a larger amount. So, yes, it’s fine to pick it up and slip it into your pocket—but that’s not necessarily where that $13 should stay.

It’s fine to pick up $13 and slip it into your pocket—but that’s not where it should stay.

This kind of thing happened to me a few times in the past couple of years. Once, when I was walking my dog, I looked down to, er, pick something up, and I saw $10. I spotted some teenagers not far behind me. Maybe, I thought, they had come this way and dropped the money? So I left it. A minute later, I heard screams of delight. “Look, $10!” one yelled. No, it didn’t belong to them—until it did.

I was walking the dog about a month ago, and there, right in front of a nearby apartment building, was $20. And then, right there, I saw a young dad wrestling a toddler into an Uber. Now here is one thing I knew. Any borderline-teenage parent needs a found $20 bill more than me. And it’s possible it was his money—certainly more possible than it being my money. Could he have dropped it in the struggle? In the end, I decided it didn’t matter and said, “Excuse me, did you drop $20?” There was a split second of hesitation. And then he said yes. I handed over the $20 and went on my way.

You were right to take the money—the chances are high the next person who saw it would not have been the proper owner yet would have kept it. But then what? Well, you can pocket it, of course, and consider it a lucky day, or maybe compensation for money you’ve dropped at some point in your life. Or you can look around, or sign on to your computer, and give it to someone who needs it more than you do.